* Lower level Army officials recommended new competition
* New aircraft would replace aging OH-58 Kiowa Warriors
* Timing of decision complicated by budget questions, nomination
By Andrea Shalal-Esa
WASHINGTON, Jan 8 (Reuters) - U.S. Army leaders want more information before they approve a multibillion-dollar competition to replace the Army's Vietnam-era OH-58 Kiowa Warrior helicopters, which may delay a decision on the matter by several months, an Army official said Tuesday.
Army Colonel John Lynch, capability manager with the Army's Training and Doctrine Command, said acquisition and requirements officials proposed buying new armed scout helicopters rather than upgrading the existing aircraft when they met with Vice Chief of Staff General Lloyd Austin before Christmas.
Rather than approving the recommendation as expected, Lynch said Austin asked for "a lot of details" about flight demonstrations conducted by potential bidders last fall, the timing and scope of the proposed acquisition and how increased use of unmanned planes would affect the Army's requirement.
"We were expecting to get a decision from the vice (chief) but we did not," Lynch said at an event hosted by Boeing Co. . He said the Army was now expected to finalize its plans during the first quarter of 2013, or possibly sooner.
"It's an affordability question for the Army," he said, noting that other programs competed for funding in the Army's aviation account. Army leaders also want to avoid problems that plagued earlier attempts to replace the OH-58 helicopters.
If approved, this would be the Army's third attempt to start replacing the OH-58 helicopters, which were built by Bell Helicopter, a unit of Textron Inc. The basic OH-58 airframe dates back to the Vietnam War era, although it has been upgraded and modernized several times to keep it current.
Boeing and a number of other weapons makers hope to bid for a contract that could eventually be worth $6 billion to $8 billion. It represents one of few new acquisition programs on the horizon at a time when arms companies are bracing for cuts in military spending after a decade of unbridled growth.
Boeing has said it plans to offer a version of its AH-6 Little Bird if the competition is launched, while Sikorsky Aircraft, a unit of United Technologies Corp and the North American unit of Europe's EADS, have each invested heavily to develop new, more capable helicopters for a possible competition.
Bell Helicopter; AgustaWestland, a unit of Italy's Finmeccanica SpA; MD Helicopters; and AVX Aircraft are also interested in the program.
Lynch said Austin's additional questions reflected the Army's determination to structure a possible acquisition program properly after two failed attempts to replace the service's aging fleet of Kiowa Warriors over the past decade.
"It was all from a perspective of 'We've canceled two scout programs in the last 10 years, so let's make sure we're being very deliberate and we actually get this one right,'" Lynch said, adding his belief that this was "probably the last chance ... to accomplish that task."
Reuters reported in November that Army officials were backing a new competition, but said senior officials still needed to sign off on the plan.
Lynch said Army officials are expected to provide the requested details to Austin in an initial briefing later this month, but the timing of a final decision may be complicated by uncertainty about the size of the Pentagon's budget and Austin's nomination to head U.S. Central Command nomination.
He said the Pentagon's chief weapons buyer Frank Kendall would also need to approve a new acquisition, but that was unlikely to occur until after Congress decides whether to impose significant additional military spending cuts in March or not.
The best-case scenario, he said, would see the launch of a new "Armed Aerial Scout" competition around mid-2014 since it takes about a year to develop the rules for a new competition. That would point to a contract award in late 2014 or early 2015.
The Army completed a series of flight demonstrations -- and visits to the factories of companies that did not have a prototype available -- last summer and early fall.
Lynch said several of the aircraft met or exceeded recommended performance requirements, and some were in the Pentagon's target range of $13 million to $15 million per aircraft, while others cost less and others cost more.
He said the evaluation of the new aircraft would include an assessment of their life-cycle costs over 30 years.
If the new competition is not approved, the Army will have to upgrade the OH-58 helicopters, he said, noting the cost of keeping the older aircraft flying would increase over time.
The fate of the competition may depend heavily on the outcome of congressional negotiations about cutting U.S. deficits, and how many additional reductions the Pentagon is forced to accept on top of $487 billion in cuts already slated to take effect over the next decade.